Figure 1 - Mondex consumer-merchant transaction
Electronic Cash Systems : An overview
Introduction
When a monetary transaction takes place between a merchant or service provider, and a consumer, it typically takes one of three forms – cash, cheque, or credit card. When a consumer wishes to make small purchases, such as less than four or five dollars, a merchant will not usually agree to the transaction if a credit card is presented, or a cheque from an unfamiliar customer is offered. However, there are many times when consumers don’t have small coins, and would much prefer to pay with a credit card or cheque. Electronic cash offers a solution to this problem – regardless of how big or small the transaction, electronic cash can be a viable alternative to traditional payment mechanisms. There are several vendors attempting to become the standard for electronic cash; the largest of these being Visa International (Visa Cash), and MasterCard through its acquisition of Mondex.
Mondex Australia’s electronic cash trial
Mondex Australia has launched internal trials of electronic cash smartcards, in conjunction with four of Australia’s largest banks (Mondex, 1998).
Details of the trial in Australia are very brief. Westpac Banking Corporation has run an in-house trial, with over two hundred staff making a variety of small value transactions (Mondex, 1998). Transaction types include both customer-to-merchant and person-to-person, as well as the re-loading of cards using custom Mondex telephones.
A similar trial has been conducted by ANZ, but on a larger scale. ANZ employees can make purchases in their cafeteria and social club, using Mondex Point of Sale terminals (Mondex, 1998). Various, unspecified, cash loading devices can be used with Mondex cards, including (as in the Westpac trial) telephones. ANZ plans to release an ANZ branded Mondex smartcard, and plans to release these cards in conjunction with the four banks associated with Mondex Australia in the second half of 1998 (Mondex, 1998).
Specific details of the success of the trial, and problems encountered during the trial, are not commonly available. However, with support from four Australian banks, and the backing of MasterCard, Mondex could well become a common part of economic transactions in Australia. However, it is not the first company to trial smartcards loaded with electronic cash in Australia. Visa, with its VisaCash system, conducted trials on the Gold Coast last year. The VisaCash system, for consumers, appeared to have worked well, and Mondex may face competition in the future.
How do Mondex smartcards work?
The exact technical specifications for Mondex electronic cash cards does not appear to be publicly available. However, the general security mechanisms for the Mondex card are available. Mondex uses public-key cryptography, and digital signatures, to authenticate transactions (Mondex, 1998). Each card, whether it be a merchant card or a consumer, has an embedded public key which can be used to digitally "sign" a transaction. This solves the problem of authentication of the merchant, and repudiation by the consumer.
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Figure 1 - Mondex consumer-merchant transaction |
The exact key size, or encryption algorithm, is not known. Presumably the key-size would be very low, so as to allow its export outside of the United States, and to allow its importation by encryption unfriendly nations such as France. The initial Mondex cards will have 16kb of ROM, and 8kb of re-writeable EEPROM for data storage (Mondex, 1998).
Mondex cards will contain three logs, to track past transactions, pending transactions, and transactions which raise exceptions (Mondex, 1998). This gives the card some form of audit trail, and should allow custom wallet devices to display the last ten transactions. With a portable reader, Mondex cards could be used to conduct transactions over the Internet.
Comparison with other technologies
There are many vendors vying for a slice of the vast electronic cash transaction market. Many vendors have already released products which are in use all over the world, two examples being CyberCash and DigiCash.
DigiCash is a form of electronic cash, that can be traded between parties over the Internet. DigiCash must be obtained from a bank, or other financial institution, and a vendor must have an account with a bank that supports DigiCash (DigiCash, 1998). DigiCash purses are only currently available for Windows 3.1/95/NT. The DigiCash company is also involved with the development of smartcards, and could establish itself as a competitor for Mondex.
CyberCash is a well established mechanism for payment of goods and services of the Internet. CyberCash also supports small transaction sizes, allowing sites to adopt a micro electronic commerce model of payment for goods and services (CyberCash, 1998). CyberCash gives consumers added benefits – they can choose one of three payment mechanisms. CyberCash supports cheques, electronic cash, or credit card transactions (CyberCash, 1998). CyberCash has a large existing customer base, and poses a significant threat to other electronic cash services that use the Internet for transactions. Furthermore, by forming industry alliances with smart-card vendors, CyberCash could pose a significant threat to Mondex in the future.
Both DigiCash and CyberCash share similarities with Mondex. All three involve electronic cash, but DigiCash and CyberCash don’t currently have the support for smart-cards that non-Internet users require when they enter a store, or attempt to use a vending machine. CyberCash, on the other hand, offers advantages over the Mondex system, because it supports credit card transactions and Mondex cards must be recharged when their cash is depleted.
Conclusions
Electronic cash systems offer vast opportunities for the consumer and the merchant. In business to business transactions, electronic cash allows businesses to verify cash transactions instantly – and to covert from one currency to another. In consumer to business transactions, it is easier for the customer because there is no need to carry physical currency, and transactions can be made over the Internet. Electronic cash offers security, through authentication, and offers non-repudiation of transactions. Furthermore, the micro-payment model allows previously unsaleable items and services to be paid for, because there isn’t a limit on the size of the transaction. When fractions of cents can be transferred between parties, publishers of content can charge extremely small fees and still receive just compensation for their efforts, because the number of people who can afford their content will increase. Provided that an electronic cash system standard evolves, the future for e-cash is bright!
References
CyberCash, CyberCoin: Micropayments Revolutionize Web Commerce,
http://www.cybercash.com/cybercash/services/cybercoin.html,
June 1998
CyberCash, CyberCash Consumers,
http://www.cybercash.com/cybercash/consumers/,
June 1998
DigiCash, Solutions for Security and Privacy,
http://www.digicash.com/index_e.html,
June 1998
Mondex, The Mondex Card, http://www.mondex.com/mxi/cgi-bin/printpage.pl?english+global&technology_card.html, June 1998
Mondex, Mondex Security Strategy, http://www.mondex.com/mxi/cgi-bin/printpage.pl?english+global&technology_security.html, June 1998